As the countdown continues to next week’s highly anticipated Budget, speculation continues to mount over potential changes to motoring taxes.

Reports suggest that the Chancellor could be planning changes in various key areas, including a pay-per-mile levy for EVs, a rise in fuel duty, a shake-up of the Motability scheme and changes to salary sacrifice. There are also reports that ZEV mandate targets could be weakened to placate carmakers.

BVRLA chief executive Toby Poston said the Government was “playing a high-stakes game of fiscal poker” and “must lay some kind of hand in a bid to placate bond markets and maintain some semblance of financial probity”.

But the industry body has expressed concerns over a possible road toll on electric cars.

Rumours earlier this month indicate that the UK government is exploring the introduction of a levy on EV driving, setting a 3p per mile fee in a move to fill a gap in fuel duty revenues caused by the transition away from petrol and diesel. The new scheme could kick in from 2028, pending a public consultation. The Times has since said electric vans are understood to be not “in scope” for the planned scheme, but plug-in hybrid drivers, who already pay duty on the fuel they use, will pay the per-mile levy at a discounted rate.

Poston said: “The topic of road pricing has been on and off the agenda for years, and something we have been consistent in calling for a long-term, considered approach to. Rumours that broke last week do not match that desire. The used EV market is immature, volatile and beset by massive depreciation. For many use cases, including rental and vans, EV demand is nowhere near ZEV mandate levels. The prospect of a specific, EV-focused pay-per-mile charge has the potential to destroy confidence across the transition. In signposting any future VED+ charge the Government must clarify that it will not apply to EVs already registered and ensure tax regime consistency.”

He also warned that rental operators and van fleets face serious challenges in their transition to zero-emission vehicles and said “this should be reflected with specific exemptions in the early stages of any pay-per-mile regime”.

The BVRLA has set out its formal submission for targeted, practical ways that the rental and leasing sector could support economic growth. This includes extending full expensing to leasing and rental, which would open up investment and support progress, along with urgent used EV market support.

Ahead of the Budget, Ford’s UK boss has also warned that an EV tax could put drivers off at a time when demand remains fragile.

Ford UK’s managing director Lisa Brankin told the BBC: “It’s certainly not the right time to do it.”

Speaking to the BBC’s Big Boss Interview podcast, she stated: “Electric vehicles in some instances have gone from being a great thing to being something that we’re trying to push people into.”

And EY has warned that higher operational costs from an EV road user charge could prompt fleets to reassess their decarbonisation strategies.

Maria Bengtsson, UK&I mobility leader at EY, said: “Companies that have invested heavily in electric fleets may find their financial models under additional pressure, potentially slowing down further investments in EV technology and infrastructure.

“Although the proposed rate of around 3 pence per mile is still significantly lower than the effective cost borne by petrol drivers today, it will make the switch to EVs less financially attractive and could risk slowing down EV adoption. Although the new system would be less costly for EV drivers initially in comparison to internal combustion engine (ICE) drivers, there may be pressure on HM Treasury to increase rates over time to fill the gap left by declining excise duty revenues on petrol and diesel vehicles.”

Bidvest Noonan, a UK and Ireland facilities management business with a fleet of more than 1,000 vehicles, also expressed concerns about a possible EV tax.

As outlined in its Electric First fleet policy, the company is aiming to have a fully electrified fleet of vehicles by 2035 and 93% of passenger vehicles introduced into Bidvest Noonan’s fleet in 2024 were electric, reflecting the rapid progress the business is making in transitioning its fleet to greener fuel sources

Declan Doyle, chief executive, said: “The Government should be incentivising companies and motorists to make the switch to electric vehicles, yet this additional charge risks doing the opposite. Even though vans will likely be exempt from this charge, facilities management companies like ours rely on large and varied fleets to support clients across the UK. A significant share of our vehicles is already electric, used for security patrols and for work across thousands of customer sites. We chose to electrify our fleet because it reduces emissions and aligns with our long-term sustainability goals, however continued progress depends on policies that give businesses confidence to invest in electric vehicles.”

But Venson Automotive Solutions says UK motorists back the Chancellor’s call for extra tax contributions from EV drivers with a mileage-based road charge.

Its research suggests that public opinion is firmly in favour of EV owners “paying their share”.

A recent survey of private and business drivers by Venson found that 40% believe a road-pricing scheme charging by miles driven – either based on MOT records, telematics data or business mileage expense claims – could help plug the significant tax revenue shortfall arising as fuel duty revenues collapse.

Simon Staton, client management director, said: “Drivers are increasingly aligned on the view that EV owners should make a fair tax contribution towards the roads, just as petrol and diesel motorists do.

“That said, this shift in public sentiment doesn’t ease the pressure on businesses now facing around £620 a year in extra tax for many electric fleet vehicles. Fleets have played a major role in accelerating EV uptake, but the growing financial impact could cause organisations to revisit whole-life costs and reconsider how they shape their fleet strategies in the months ahead.”

Staton also said EV owners would want clarification on how the Government will address fairness issues, such as rural vs urban drivers, and those driving for business. And he warned that rising operating costs could well impact EV adoption and lease renewal decisions among fleets.

He finished: “If ministers want the EV market to keep accelerating, they’ll need to give fleets the support they deserve. Hints that the Expensive Car Supplement threshold might be raised in an upcoming fiscal statement are reassuring, as it would ease some of the current cost pressures. Until decisions are confirmed, however, many businesses may take a step back and reassess further EV investment.”

Rumours are also rising of changes to Vehicle Excise Duty (VED) and company car tax Benefit-in-Kind (BiK) rates, but EY’s Maria Bengtsson has warned that this too could impact demand.

Bengtsson went on: “The Government’s announcement of the electric car grant earlier this year aimed to stimulate EV adoption, but any new tax increases on EVs could counteract these incentives. This is particularly pertinent given the competing demands of the ZEV mandate, which seeks to accelerate the transition to cleaner and greener mobility, and remains a critical challenge for UK automakers. Striking the right balance between incentivising EV adoption and meeting fiscal targets will be crucial.”

On the subject of the ZEV mandate, Electric Vehicles UK (EVUK) – a coalition from across the EV industry – has warned of lobbying from legacy carmakers for the EV sales targets to be weakened and has urged the Government not to “dilute the effectiveness” of its flagship ZEV mandate.

The coalition said changes to the ZEV mandate earlier this year are already estimated to have lost up to two million battery EV sales by 2030 – and called on the Government to stand firm against pre-Budget lobbying for the UK EV sales targets to be diluted for a second time in 2025.

Salary sacrifice scheme changes

Salary sacrifice schemes, one of the strongest growth channels for EV uptake, may also face tighter limits in the Budget, according to speculation.

Reports suggest that Reeves could end the National Insurance exemption on salary sacrifice in general, which would affect pensions and other benefits such as electric vehicles.

Startin Group has warned that any curbs on tax savings would weaken one of the most effective tools employers have for encouraging drivers to switch to zero-emission vehicles.

Lee O’Connell, head of group fleet at the dealership group, said: “Businesses are nervous, and they are right to be. These proposals cut straight across the momentum we have all worked hard to build. If you tell a driver they could be hit with an extra £250 a year in running costs and possibly lose part of their salary sacrifice advantage, some will question whether switching to electric still makes financial sense.”

O’Connell added that Startin’s clients want clarity, not mixed signals. “Fleets have planned around stable tax policy. Sudden shifts unsettle decision makers, and we are already hearing concern from operators running vans and field teams who fear they will be disproportionately exposed.”

Fuel duty rise on cards

Fears are also mounting over a fuel duty rise. The current 5p-a-litre fuel duty cut was introduced as a temporary measure in March 2022 shortly after Russia’s invasion of Ukraine and maintained through 2024, but is due to end in March 2026.

Removing this fuel duty cut would push the average price of petrol to 142.2p a litre and 150.6p for diesel and could lead to a £100-a-year rise in drivers’ fuel bills.

While the Chancellor is facing calls from eco and public transport campaigners to end the 5p cut, motoring and logistics organisations want it extended.

Business group Logistics UK has warned Reeves of the inflationary impact that reversing the current cut in fuel duty could have on the economy.

Kevin Green, Logistics UK’s acting chief executive, said: “Fuel is an unavoidable cost that our industry must account for when undertaking business, but reversing the current 5p per litre cut would add at least an extra £480m a year to our fuel bills. At a time when logistics businesses are already battling rising costs and operating on extremely narrow margins (sometimes as low as 1%), this is a charge which, regrettably, would have to be passed on to customers – and ultimately consumers – and would have an inflationary impact on the whole economy.”

There are also concerns that Reeves could end the 15-year freeze on fuel duty, which has been unchanged at 57.95p (52.95p inclusive of the temporary 5p cut) since 2011.

VAT cut on EV charging

Alongside road pricing, there has been speculation of changes to VAT on EV charging.

The Chancellor is coming under increasing pressure to cut VAT on public charging in line with the tax rate on at-home charging. Currently, public charging is taxed at 20%, compared to just 5% for those charging at home. This is placing a greater burden on drivers without access to private charging, often people living in flats or rental properties, who are left paying more tax for the same electricity.

However, reports indicate the Government is actually planning to scrap the 5% VAT charged on domestic energy bills. EY’s Maria Bengtsson said: “This would widen the disparity between the VAT applied to public EV charging and that applied to home charging via domestic tariffs, potentially dissuading those without off-street parking to purchase an EV.”

New research by Gridserve reveals that 49% of non-EV drivers would switch to electric vehicles sooner if public VAT charging rates matched home charging rates.

Daniel Kunkel, CEO at the EV charging firm, said: “Removing VAT from public charging would be a significant move towards levelling the playing field and making EV ownership easier for everyone, no matter where they live. The current disparity between the 20% VAT on public EV charging and the 5% on home charging puts a disproportionate financial burden on those without home charging facilities, which could affect more lower-income households.

“With the Government already having recognised the importance of the affordability of EVs and introducing the new Electric Car Grant, we now need to address the cost of public charging. Ahead of the Autumn Budget, we urge the Government to demonstrate its commitment to fairness and climate action by supporting this change and ensuring public charging is not only reliable and widespread but also equitable for all.”

Government urged to reconsider plans to scrap ECOS

Pressure is also rising for the Government to reconsider plans to end Employee Car Ownership Schemes (ECOS). The National Franchised Dealers Association (NFDA) has written to the Chancellor, warning that the proposed changes will have damaging consequences for the automotive sector and its employees.

Under draft legislation published by HMRC in July, all company cars made available under ECOS arrangements on or after 6 October 2026 would become liable for Benefit-in-Kind (BiK) taxation. The Treasury forecasts that the measure will raise £275m in additional tax revenue in its first year (2026/27).

In its letter to the Chancellor this week, the NFDA again stressed the critical role ECOS plays in enabling employees to access affordable vehicles and in supporting the transition to electric mobility.

Sue Robinson, chief executive of the NFDA, said: “The Government needs to consider the consequences of scrapping the ECOS scheme as it will damage the attractiveness of employment in the industry and reduce the number of new cars being registered.

“Removing the ECOS scheme would be short-sighted and detrimental to both the workforce and the wider automotive sector. For instance, it would slow the electrification process as many of the cars entering the nearly new market through ECOS are electric vehicles. It would also deter employees who might not otherwise be able to access a vehicle, and scrapping such an employee benefit would inevitably hinder staff retention.”